When you get a remodel quote, the number on the last page was built one of two ways, and knowing which one changes how you should read the whole contract. It's either a fixed price, one agreed sum for the whole job, or time-and-materials, where you pay for what actually gets used as the work goes. Neither is a trick and neither is always right. What matters is that the pricing method fits the project, and that you understand who's carrying the risk. Here's how each one works and when we recommend it.
- Fixed price (lump sum): one number for a defined scope. You get budget certainty; the contractor absorbs the risk of underestimating labor.
- Time-and-materials (cost-plus): you pay actual labor and materials plus an agreed markup. Flexible and transparent, but open-ended unless capped.
- Fixed price needs a finished scope and selections; undecided items get handled with written allowances.
- In California, the down payment on a home improvement contract is capped at 10% or $1,000, whichever is less, with the rest tied to milestones.
Fixed price (lump sum)
A fixed-price contract gives you a single, all-in number for a clearly defined scope of work. If the framing takes two extra days or a sub quotes higher than expected, that's the contractor's problem, not yours, because the price is locked. This is the option most homeowners want, and for good reason: you can plan your financing and your life around a number that won't move.
The catch is that a real fixed price requires a finished plan. The contractor can only lock a number if they know exactly what they're building: the layout, the structural work, and ideally the finishes. That's why a serious fixed-price bid takes longer to produce, and why a suspiciously fast "ballpark that becomes the contract" should make you nervous. For anything you haven't picked yet, a good fixed-price contract uses allowances: a set dollar amount budgeted for, say, tile or plumbing fixtures, which trues up later based on what you actually choose. Allowances are normal and honest, as long as they're realistic and written down.
Time-and-materials (cost-plus)
With time-and-materials, sometimes called cost-plus, you pay for the actual labor hours and materials the job consumes, plus an agreed markup, often somewhere in the 10% to 20% range, that covers the contractor's overhead and profit. Every hour and every receipt is billed as it happens.
The upside is transparency and flexibility. You see the real cost of the work, and the scope can shift without renegotiating a whole contract. The downside is obvious: there's no fixed ceiling. If the job runs long, so does the bill. The fix for that is a not-to-exceed cap written into the contract, a maximum the total can't cross, which gives you much of the flexibility of T&M with some of the protection of a fixed price.
When each one makes sense
Here's the honest rule we use:
- Use fixed price when the scope is well defined: a kitchen or bathroom remodel with plans drawn, an addition designed, selections mostly made. This is most remodels, and it's our default.
- Use time-and-materials when the scope genuinely can't be pinned down: unknown-condition repairs on an older home, water or termite damage that's hidden until walls come open, or an exploratory first phase before the real design is set. Pricing a fixed number on true unknowns just means the contractor pads it heavily to be safe, and you overpay for their uncertainty.
A lot of good projects use a blend: fixed price for the known work, with a T&M or contingency line for the genuinely unpredictable parts, and allowances for the selections you haven't locked. What you want to avoid is a "fixed price" that's really a loose guess destined to grow through change orders. That's the worst of both worlds, the false comfort of a number that doesn't hold.
What California law requires either way
No matter which pricing method you use, a California home improvement contract has to follow the rules, and they protect you:
- The contract must be in writing and signed before work begins.
- The down payment cannot exceed 10% of the price or $1,000, whichever is less. A contractor demanding a big cash deposit up front is a red flag.
- The rest is paid in progress payments tied to completed milestones, so you're never paying far ahead of the work.
- Changes to the scope should be documented in written change orders with their own price and schedule impact.
When you're comparing quotes, make sure you're comparing the same pricing method and the same scope. A T&M "estimate" and a fixed-price "bid" are not the same animal, and lining them up side by side without noticing that is how homeowners get surprised. Our guide to reading and comparing bids walks through exactly what to look for.
How we price our jobs
Our default is a fixed price in writing, built from a finished scope, with clear allowances for anything you haven't selected yet, so you know your number and we carry the risk of hitting it. We only recommend time-and-materials where it's genuinely the fairer deal for you, usually unknown-condition repairs, and even then we cap it. It's the same principle as the rest of how we work: one family accountable for the result, start to finish. See our process page for how a job runs.